Tools chosen: kalshi_direct kalshi_related polymarket_related claude_news fred code_execution

Sub-questions (Fermi decomposition)

Planner reasoning

This question asks whether IRS tax collections in FY/tax year 2026 will exceed 2025. Historically the IRS collects more nominally almost every year, with rare exceptions during recessions or major tax cuts. Key drivers: GDP growth, employment, inflation, tax policy changes (TCJA extensions, new Trump tax law), and any IRS administrative disruptions.

# Event Will the IRS collect more in gross taxes in tax year 2026 than in 2025? # Outcomes to forecast - **Yes** (2026 gross collections > 2025 gross collections) - **No** (2026 gross collections ≤ 2025 gross collections) # Kalshi market anchor **Current YES price: 83%** — up +9pp over 7 days, +13pp over 30 days. Range over 48 days: 62–83%. Volume: ~86 contracts/day. Strong recent upward momentum; market is at its observed high. # Sub-question answers 1. **IRS gross collections 2025 vs prior years; historical base rate of YoY increases?** — FY2025 gross collections: ~$5.3T [IRS Data Book]. Historical base rate of YoY increase: 83.3% (20/24 years, 2001–2024). Only 4 decline years, all recession-driven. No back-to-back declines ever observed. [code_execution] 2. **2026 GDP growth, employment, nominal income consensus?** — Real GDP Q1 2026: $24,153B, slightly above Q4 2025 [FRED/GDPC1]. Payrolls May 2026: 159,001K, growing ~170K/month [FRED/PAYEMS]. Federal tax withholding (wage proxy) grew ~13% YoY through Q1 2026 [BPC/deficit-tracker]. Nominal economy remains expansionary. 3. **Major tax law changes for 2026 reducing collections?** — OBBBA (passed July 2025) made TCJA provisions permanent, raising refunds ~11% YoY [BPC]. Corporate tax revenue running ~10% below CBO expectations due to OBBBA full-expensing [CBO]. Tariff refunds (~$166B in customs duty refunds under IEEPA ruling) create significant downside to customs revenue [CBO]. 4. **IRS staffing/operational disruptions?** — 26,000+ IRS employees departed via voluntary separation incentives [GovExec]. 2026 appropriations cut IRS base budget 12% ($1.1B) [CBPP]. GAO warns 2026 filing season "at risk." Yale Budget Lab estimates 22K RIF reduces revenues ~$198B over 2026–2035, but withholding-based collections less affected near-term [PGPF]. 5. **Kalshi pricing?** — YES at 83%, matching the historical base rate. [kalshi_direct] # Key facts (high-confidence, factual) 1. [CBO, Feb 2026] FY2026 revenues projected at $5.6T — +6.9% vs FY2025 $5.3T baseline 2. [CBO, mid-May 2026] YTD revenues Oct–May are ~$50B (1%) *below* CBO's own baseline, with individual/payroll taxes slightly ahead but corporate (−$20B, −10%) and customs (−$60B, −25%) well below 3. [BPC] Through March 2026, FY-to-date revenues +10% YoY; spending +2% 4. [FRED] Real GDP grew from $23,548B (Q1 2025) to $24,153B (Q1 2026) — ~2.6% real growth 5. [FRED] Nonfarm payrolls added ~570K jobs Oct 2025–May 2026 6. [code_execution] Historical decline years all recession-associated; no back-to-back declines 2000–2024 7. [CBO] Administration paying ~$166B in IEEPA customs duty refunds; timing/total uncertain # Cross-market signals - **Kalshi related:** No other directly comparable markets found - **Polymarket:** No matching markets found - **Sportsbook/other:** N/A # Analyst opinions and speculation - CBO baseline (Feb 2026): Projects clear Yes outcome (+6.9%) even before tariff headwinds materialized [CBO] - PGPF/Yale Budget Lab: IRS staffing cuts reduce long-run enforcement revenue but limited FY2026 gross collections impact [PGPF] - GAO: Warns 2026 filing season operational risk from staff cuts [fedweek] - CBO tariff note: Customs refunds and lower tariff rates are a material downside risk to total revenue vs. expectations, but individual/payroll taxes remain the dominant (~80%) revenue share [CBO] # Directional lean per outcome - **Yes (collections rise):** Strong support — 10% YTD revenue growth, positive employment/wage trends, CBO baseline projects +6.9%, historical 83% base rate, no recession currently evident in data - **No (collections fall):** Requires: tariff refund shock larger than expected + corporate tax shortfall worsens + possible H2 economic deterioration; customs duties ~3–4% of total revenue, so even large tariff shortfall doesn't flip the aggregate # Gaps / unknowns - Final magnitude of IEEPA customs duty refunds (could be $100–200B+ range) - H2 2026 economic trajectory — leading indicators mixed - Equity market capital gains realizations for 2026 tax year - Whether OBBBA deductions/credits depress Q4 estimated payments - Resolution definition: gross vs. net collections (question says "collect" — likely gross based on IRS Data Book framing) # Calibration anchors - **Kalshi current YES price: 83%** (the primary anchor) - Historical base rate: 83.3% — Kalshi is essentially at the unconditional base rate - CBO projects +6.9% — would need severe H2 deterioration to flip - YTD actual data (through May 2026) shows +~8–10% YoY — on pace for Yes barring major shock - Only scenario for No: recession + tariff refund shock + corporate shortfall combining to overwhelm strong individual/payroll tax base

1. Both forecasters treat the $166B IEEPA customs duty refund as a modest risk because customs are "only 3-4% of total revenue," but the brief notes CBO's YTD data already shows customs running $60B below baseline through May — that's a ~25% shortfall in just 7-8 months, and the total refund figure is uncertain up to $200B+. Neither forecaster quantifies how much of this has already hit YTD figures versus what remains as H2 downside. 2. The brief flags that CBO's mid-May 2026 update shows YTD revenues running ~$50B (1%) *below* CBO's own February baseline, yet both forecasters cite the baseline "+6.9% projection" as supportive without adequately adjusting for the fact that the CBO itself is already seeing underperformance against that projection. The +8-10% YoY figure (from BPC through March) and the -1% vs. baseline figure (CBO through May) need to be reconciled — the later, more complete data point is more bearish than both rationales suggest. 3. Neither forecaster engages seriously with the equity capital gains wildcard mentioned in the "Gaps/Unknowns" section. Given significant equity market volatility in 2026, capital gains realizations could swing individual income tax collections by tens of billions in either direction, and this tail scenario is entirely absent from both rationales. 4. Both forecasters assign essentially the same probability (~86-88% Yes) but neither explicitly models the compounding scenario where corporate shortfall (-10% vs. CBO), customs refund shock, and H2 economic softening all occur simultaneously. The brief notes these are correlated downside risks, and the joint probability of co-occurrence deserves explicit treatment rather than dismissal as individually insufficient. 5. The IRS staffing disruption risk is under-weighted in both forecasts. The brief cites GAO warning the 2026 filing season is "at risk" and 26,000+ employee departures — operational failures in processing could affect *gross collected* figures even if underlying tax liability is strong, yet both forecasters essentially dismiss staffing risk as a long-run rather than FY2026 issue without citing evidence for that timing assumption.

85% (65% confidence)

Yes: 85% No: 15%

YTD revenues are tracking well above 2025 with individual/payroll taxes dominant and growing, CBO baseline projects +6.9%, and the historical base rate is 83%. The critique correctly notes that customs refunds, corporate shortfalls, and operational risks compound and CBO is already seeing slight baseline underperformance, so I trim slightly below Forecast 1 to roughly the Kalshi anchor.

Total pipeline time: 137.5s